OPINION: Surge of tech-enabled solutions in ESG — unlocking the why, where, and what's next

Today, the business landscape is evolving rapidly across the globe! And integrating technology into Environmental, Social, and Governance (ESG) practices is not just a fad. It is a fundamental shift if the aim is to achieve net-zero goals. Regulatory push and the evolving global standards are also driving investments into tech-enabled ESG solutions. Growing demand for transparency and accountability from investors and customers has strengthened the adaptation.

The ‘2022 ESG Global Study’ by Oracle, which involved over 11,000 participants from 15 countries, shows that 89% of business leaders believe that companies using tech for sustainability are more likely to succeed. A whopping 93% of these leaders acknowledge technology's crucial role in enhancing corporate sustainability and 94% advocate the use of technology in ensuring data accuracy, automating data collection across sectors, planning and revising sustainability targets based on performance, and automating report generation.

From 'Why' to 'How': Technology's Impact on ESG Implementation

The journey of technology within ESG commenced with recognising its importance, the 'why'. As sustainability challenges grew, the focus shifted towards understanding the 'how.' Beyond just enhancing data accuracy and scalability, technology is now instrumental in refining business models and boosting long-term revenues, thereby improving the bottom line.

As the ESG landscape evolves, challenges emerge, including diverse ESG Key Performance Indicators mandated by rating agencies and the lack of standardization across regulatory frameworks. Consequently, companies face difficulties in achieving transparency and standardisation in ESG data. Moreover, there's an urgent need for sustainable operational solutions, like robust emissions monitoring, insightful benchmarking, and effective performance management.

To address these challenges, a range of technologies are emerging as the key enablers. Cutting-edge AI-driven tools accurately collect and analyze extensive data from a variety of sources, including financial reports, operational data, supply chain insights, and social media. This holistic approach empowers companies to present precise and comprehensive information on ESG parameters.

Furthermore, Natural Language Processing (NLP) technology plays a crucial role wherein AI-powered NLP analyse text-based data extracted from corporate sustainability reports and stakeholder communications, identifying patterns, sentiments, and other vital information. This further ensures that sustainability disclosures are aligned with stakeholder interests.

This shift is more than a functional enhancement; it represents a transformative movement where sustainability is seamlessly integrated into business operations, thus simplifying the complex ESG landscape.

Tech revolutionizing the three pillars of ESG

Technology plays a pivotal role across the ESG aspects of sustainability, evident through its application in various sectors.

Leveraging technology for environmental stewardship

AI technology revolutionizes environmental conservation by optimizing operations in solar and wind farms, boosting their efficiency and productivity. This involves using advanced algorithms to analyze and predict energy generation, enabling better resource management. AI-driven tools also monitor solar panels and wind turbines, ensuring they operate optimally and enhancing their longevity.

Additionally, leading companies across industries are driving environmental conservation through energy-efficient designs and sustainable supply chain management. AI integration in building management systems enhances energy efficiency, fostering healthier, sustainable living spaces.

In the banking and finance industry, AI-based software integrates geospatial data into financial theories for site evaluations and climate risk analysis. Employing machine learning it evaluates the potential effects of funded projects on ESG factors, ensuring conscious decision-making.

Empowering communities through technology

Technology acts as a bridge, fostering inclusivity within society. AI-driven healthcare platforms extend medical services to remote areas, addressing social inequalities. In the agriculture sector, Web3 companies are using blockchain technology to connect farmers and corporations, facilitating sustainable agriculture and carbon offsetting. These initiatives enable the generation and sale of verifiable carbon credits, encouraging farmers to adopt sustainable farming practices supported by corporate funding. This collaboration helps meet the ESG targets of the corporations while fostering sustainable agriculture, benefiting both the environment and society.

Technology enhancing industry integrity and ethical governance

Blockchain technology offers a powerful solution for traceability in various industries, particularly in sectors where authenticity, transparency, and ethical practices hold significant value. One prime example is the diamond industry, where the application of blockchain ensures a robust system for tracing the origins of diamonds, safeguarding against the trade of conflict diamonds. This not only aligns with the core principles of ESG but also promotes transparency and supports global efforts in ethical trading. Such technological advancements reinforce social responsibility and ethical governance within industries, illustrating the integral role of technology in enhancing governance standards. Blockchain brings a new level of integrity to corporate reporting, making it easier to track and verify compliance with sustainability standards.

Unfolding technology’s role as ESG continues to evolve

The integration of technology in ESG practices is currently in a nascent stage, with its full potential yet to be tapped. Technologies such as AI, blockchain and IoT will continue to refine ESG management significantly. AI will provide more accurate and unbiased analyses, while blockchain will enhance transparency and immutability in supply chains. IoT will be pivotal in enabling real-time environmental monitoring, empowering businesses to act swiftly on sustainability metrics.

Numerous small-scale companies and startups are pioneering tech-enabled ESG solutions. These initial efforts are key in setting the stage for broader and more impactful applications in future.

Companies that adopt and innovate with these emerging technologies will stay ahead of the growth curve, reaping the benefits of enhanced ESG strategies and contributing to a sustainable future. By embracing and advancing these technological solutions, companies can shape a more sustainable, equitable world, ensuring they remain at the forefront of the evolving business landscape.

Shailesh Tyagi is Partner, Sustainability and Climate Leader, at Consulting Deloitte South Asia!

Disclaimer: The opinions expressed are of the author/interviewee and do not necessarily reflect the views of Business Insider India. The article has been partly edited for length and clarity.